Gold Eases as US Budget Cuts Eyed

Gold prices eased on Monday as demand waned for gold-backed exchange-traded funds and investors continued to digest the effect of wide-ranging U.S. government spending cuts on bullion.

A lack of major U.S. economic indicators and a flat U.S. equities market failed to provide gold with a new catalyst, leading to quiet trading.

Some investors remained on the sidelines, with President Barack Obama and congressional Republicans still apart on a deal to avert automatic U.S. budget cuts. The White House ordered cuts in government spending on Friday night. (Read More:CNBC Explains Sequestration)

"February marked the largest monthly outflow across physically backed gold exchange-traded products. Continued net redemptions at this pace pose the largest downside risk to prices, in our view," Suki Cooper, precious metals strategist at Barclays Capital, said in a note.

U.S. gold futures for April delivery settled up 10 cents per ounce at $1,572.40, with trading volume about 30 percent below its 250-day average, preliminary Reuters data showed.

The SPDR Gold Trust notched an outflow of 0.6 tonne on Friday, extending its losing streak after reporting the biggest ever one-month drop in February.

Gold prices in February fell for a fifth straight month for the first time since 1997. Buying interest has dried up after the metal failed to rally back toward record highs last year despite successive rounds of monetary easing from the Federal Reserve.

Gold mining stocks took a hit too as bullion prices tumbled. The S&P GSCI Gold index, a gold equities benchmark, also posted a five-month losing streak in February for its longest consecutive monthly decline since 1996.

Bullion investors now look forward to the European Central Bank's meeting on Thursday for trading cues.

Underpinning gold prices was news Janet Yellen, the Federal Reserve's influential vice chair, said on Monday aggressive U.S. monetary stimulus is warranted given how far the economy was operating below its full potential.

Among other precious metals, platinum was down 0.3 percent at $1,564.74 an ounce and palladium dropped 0.7 percent to $714.47 an ounce.